Opel Wedding In Doubt

by Bertel Schmitt

Published: June 4th, 2009

Magna expects to consummate the marriage of Opel by September. This doesn’t surprise; it just so happens that the German elections are on 9/27/2009. In the meantime, Deutschland develops distinct doubts about the deal. “The German government made it clear that the door remains open to rival bidders,” Reuters reports. “The process is still open to all the bidders,” government spokesman Ulrich Wilhelm told reporters in Berlin. The German government keeps repeating that other bidders, including Fiat and China’s BAIC, still have a shot if they improved their bids. Doubts reach all the way to the top . . .

Even Angela Merkel downgraded Magna in public to “potential investor” status. A German official told Reuters that they would “seriously consider” other suitors if talks with Magna failed.

The odds of failure of the Magna deal are high. As anyone involved in mergers and acquisitions knows, anywhere between fifty and seventy percent of mergers fall through before the deal closes, sometimes over trivia. For instance, which of the merging honchos gets the primo parking spot?

Multi-party mergers such as the Opel/Magna deal (which involves GM, Opel, Magna, Sberbank, the unions, the dealers and three governments) are especially prone to breakdown. Add to that that more than 80 percent of mergers fail after consummation, one wonders whether people merge at all. Must be a hormone thing.

As far as Opel/Magna goes, many details are wide open: May Opel cars be sold globally? Is the new entity a German or European stock corporation? Even the ultimate shareholder structure is far from hashed out. Workers Council leader Klaus Franz made noises that GM might get less than 35 percent, and the workers might get more than the planned 10 percent.

As for selling Opels outside of Europe, everybody at Opel is convinced that under the current deal on the table, North America and China are off-limits. So much for the denial of the Dept. of the Treasury and their avowed of the principles of free trade.

What’s more, everybody is prepared for eleventh hour demands by GM. They are always good for a surprise. Minutes before the Friday night deal in Berlin was to be signed, government officials found language in the contract that specified that €334 million worth of German government money was to be transferred to the tax haven of the Cayman Islands, Der Spiegel reports. The paragraph was stricken. GM said it was an inadvertent blunder. Pigs entered the no-fly zone over Berlin’s government district as GM crossed their hearts.

As other deadbeats line up in Germany for government handouts, invoking Gerechtigkeit (“equitable treatment”), while the (voting) man and woman on the street are more and more against bailouts, Berlin is looking for a better Opel deal.

Italian Prime Minister Silvio Berlusconi said on Wednesday his government would be willing to intervene with Germany to support another Fiat bid if the automaker wanted. Fiat is ready to resume talks, if Magna fails, reports the Sueddeutsche. Pressure mounts on Secretary of State, Enterprise and Regulatory Reform Lord Mandelson to put pounds on the table to keep the Ellesmere Port car plant of Vauxhall open.

BAIC representatives met with German government members on Tuesday. However, nothing concrete was discussed. “They are still thinking” is the word in Berlin. BAIC already had said that they would need much less in German government Geld than other suitors. And if they need more money, no need to lobby for it publicly. BAIC is for all intents and purposes the Beijing (municipality) government—Beijing owns BAIC.

Is Berlin re-kindling old flames to put fire under the derrieres of GM and Magna to come to a quick close? A case of buyer’s remorse? A preparation for failure? It ain’t over until it’s over. Currently, it ain’t over at all.

Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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John Horner on Jun 04, 2009

Magna brings very little to this party except ambition and close ties to Russian Oligarchs. Maybe that will be enough to close the deal, but I doubt it will be enough to beat the divorce odds. Great pic, BTW.

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Tricky Dicky on Jun 05, 2009

I've also read the rumour (maybe it came from Magna co-CEO Wolf, saying that they were also looking to pick up the Chevvy business in Russia. Has this been confirmed anywahere? Year to Date, Chevvy have sold 46K units in Russia and Opel have sold 16½K (3.0% market share). I have no understanding of how they can plan to achieve 20% share in the short term and sell onver 1 million units in the long term (even with light commercial vehicles thrown into the meleé). I think zu Guttenberg would rather see Magna choke than get any German tax money. They reckon it will only cost €1bn to shutter the 4 plants and provide appropriate social welfare. Mercedes in Stuttgart are more or less commuting distance from Russelsheim and they'd certainly welcome picking up more small car engineering expertise, so there will certainly be some re-employment possibilities in this scenario.

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